UNDER VALULATION OF GOODS TO AVOID E-WAY BILL

[Mr. M. GOVINDARAJAN]

In M/S RADHA FRAGRANCE VERSUS UNION OF INDIA AND 4 OTHERS - 2023 (2) TMI 542 - ALLAHABAD HIGH COURT, the petitioner is a registered dealer under the Haryana State Goods and Service Tax Act, 2017.  He is engaged in the business of manufacturing and sale of Pan Masala and Chewing Tobacco.  The petitioner received orders for supply of Pan Masala and Chewing Tobacco from two registered dealers of State of Jharkhand.  The petitioner sent the goods, through four Tax Invoices as detailed below-

• Tax Invoice No.RFTB/18-19/9 dated 02.02.2019 -  30 Cartoons Chewing Tobacco for a sum of Rs.47,465/-, which included discount, Integrated G.S.T. and Cess;
• Tax Invoice No.RF/18-19/10 dated 02.02.201 - , 30 Cartoons Pan Masala for a sum of Rs.49,068/-, which included discount, Integrated G.S.T. and Cess;
• Tax Invoice No.RFTB/18-19/8 dated 02.02.2019 -  30 Cartoons Chewing Tobacco for a sum of Rs.47,465/-, inclusive of discount, Integrated G.S.T. and Cess; and
• Tax Invoice No.RF/18-19/11 dated 02.02.2019 - 30 Cartoons Pan Masala for a sum of Rs.49,068/-,which included discount, Integrated G.S.T. and Cess in favor of M/s Alliance Trading Company were sent through the transporter Shyam Freight Carrier along with Bilties.

Interception of vehicle

The goods in transit from State of Haryana to Jharkhand were intercepted by mobile squad in Kanpur. The driver of the vehicle produced goods receipts No.413 and 414 and tax invoices No.RF18-19/10 and RF18-19/11. During vehicle verification conducted on 05.02.2019, it was found that the vehicle was transporting 120 Cartoons of Pan Masala and tobacco in place of 60 Cartoons as was evident from tax invoices produced by the driver. The goods were not carrying E-Way Bill as the value of goods were claimed to be below Rs.50,000/-. The Mobile Squad, on inspection, found that in each cartoons there were 200 boxes and in each boxes, 32 pouches were kept and on every pouch, MRP Rs.4/- was printed. The total value of 60 Cartoons came to Rs.15,36,000/- and after allowing discount of 25% and excluding tax and Cess, the basic value came to Rs.6,12,766 while the value on both the invoices was declared collectively Rs.69,600/-.

Show cause notice and reply

A, a show cause notice in Form MOV 07 was issued on 06.02.2019 to the petitioner by the Revenue. A detailed reply was filed on 13.02.2019 by the petitioner.  In the reply to the notice it was mentioned that-

• the tax invoices in respect of tobacco were misplaced by the driver and could not be produced at the time of interception of goods;
• the value of 30 cartoons of tobacco was Rs.47,465/- each;
• the question as to the jurisdiction of State of Uttar Pradesh in intercepting the goods and detaining the same was also raised; and
• the petitioner has recently started the business and with a view to promote his business, he was charging price much below the MRP printed on the pack.

Assessment order

The proper officer  passed the order under Section 129(3) of the Central GST Act, 2017 read with Section 20 of Integrated GST Act, 2017 rejecting the explanation submitted by the dealer and directed for deposit of integrated tax to the extent of Rs.7,27,235/- and the same amount of penalty totaling Rs.14,54,470/-  on 14.02.2019. Aggrieved by the order, an appeal under Section 107 of the GST Act of 2017 was filed before the First Appellate Authority.  The appellate authority dismissed the appeal vide their order dated 02.03.2019, confirming the order dated 14.02.2019.

Writ petition

Being aggrieved by the order of Appellate Authority the present writ petition has been filed before the High Court.

Contention of the petitioner

The Writ petitioner submitted the following before the High Court-

• Section 4 of Integrated GST Act, 2017 read with Section 2(91) of Central GST Act, 2017 provides for authorization of officers of State Tax or Union Territory Tax as Proper Officer, who have to perform function under the Act.
• No notification has been issued by the Central Government under Section 4 of IGST Act as a ‘Proper Officer’ exercising power contained under Section 129(3) of the Central GST Act, 2017. 
• The State Taxing Officers were not empowered to detain and check the vehicle.
• If there was any discrepancy, they should have reported the matter to the Assessing Officer of the State of Haryana where the matter could have been looked during the assessment proceedings.
• The tax invoices for tobacco was generated along with tax invoices of Pan Masala on 02.02.2019 but due to the fault of the driver, the same was not produced before the detaining authority and was submitted at the time the reply given to the notice. 
• The mandatory requirement of carrying E-Way bill as per Rule 138 is only when the goods are valued at Rs.50,000/- or more.
• The petitioner had started his business only in the year 2018 and to compete in the Pan Masala segment, he was offering huge discount and the price disclosed in the Tax Invoices cannot be disbelieved looking to the competitiveness in the business.

Contention of the Revenue

The Revenue contended the following-

• In order to avoid E-Way bill and production and the sale being uploaded on the web-portal, the goods were deliberately undervalued by the petitioner.
• During transit, the driver of the vehicle was only carrying with him two tax invoices and bility for Pan Masala but no tax invoices for Tobacco was with him.
• The tax invoices were later on produced along with explanation furnished by the dealer.
• the price of one Cartoon, calculated on the basis of MRP of Rs.4/- per Pan Masala and after giving trade discounts of 25%, was fixed at Rs.10,240/- while the tax invoices reflect price of one Cartoon at Rs.1,160/- so that there would be no need of downloading the E-Way bill mandated under Rule 138.

Order of High Court

The High Court considered the submissions of the parties to the writ petition. The High Court observed that from perusal of the tax invoices, appended along with the  petition, it transpires that price disclosed for each Cartoons of Pan Masala is Rs.1,160/- and total cost of 30 Cartoons sent to each of the dealers comes to Rs.34,800/- wherein 25% discount i.e. Rs.8,700/- has been given. Further, addition of IGST and Cess has been done at 28% and 60% respectively. Thus, the total cost comes to Rs.49,068/- for each of the tax invoices generated for a particular consignee for 30 Cartoons, which is well below the threshold limit of Rs.50,000/- necessitating downloading of E-Way bill.  Similarly, tax invoices of Chewing Tobacco reflect price of each Cartoon at Rs.348.49 and total collective cost of 30 Cartoons being 10,454.70. 25% discount have been given thereon and addition of NCCD, IGST and Cess has been done and the total cost of 30 Cartoons comes to Rs.47,465/-. This is also below the threshold limit requiring E-Way bill for transit of goods.

The High Court framed the  question to be considered in this writ petition is as to whether in the garb of certain protection given under Rule 138 dispensing requirement of E-Way bill for goods valuing below Rs.50,000/-, a dealer who is a manufacturer, can be allowed to send his goods to different consignees undervaluing the goods and the Tax Authorities not to proceed taking action under the Act.

The High Court observed that during interception of goods, the tax invoices produced was only for Pan Masala and not for Tobacco. During the verification of goods, it was found that value of each pouch of Pan Masala was Rs.4/- and each Cartoon contained 200 boxes and 1 box contain 32 pouches. On the total calculation done for each Cartoons, the value came to Rs.10,240/- after giving 25% discount. The disclosure by the dealer per Cartoon was only Rs.1,160/- and thus after giving trade discount and addition of taxes, the value was brought down to the threshold limit of Rs.50,000/-.   The Taxing Authorities, on fair valuation, found that the goods, which were in transit both Pan Masala and Tobacco accounted for Rs.7,12,766/- but  the same was not disclosed. Due to  undervaluation of goods tt the authorities proceeded and imposed IGST and penalty.

The High Court next analyzed the purposes of the E-Way Bill.  The very purpose of downloading E-Way bill is that every goods, which are in transit, is recorded in the Web Portal and the Government has a clear picture of the goods which are manufactured and sold by the dealers either Inter-State or Intra-State.  It does not allow the dealer to undervalue his goods so as to escape it from bringing to the notice of the Government and the Taxing Authorities by uploading the same on the Web-Portal.

The petitioner had started his business in the year 2018, prior to the interception of the goods had carried 11 transactions and none of the transactions were ever reported on the Web Portal and no E-Way bill was downloaded by him.  If such a conduct of a dealer is permitted, it will harm the business world and lead to a parallel economy and the very purpose of enactment of Goods and Service Tax Act would frustrate.   The High Court found that it is a case of grossly undervaluing the 3,84,000 pouches of Pan Masala being sent by the dealer disclosing its price as Rs.69,600/- to avoid downloading E-Way bill and bringing the transaction on record that the goods were undervalued to such an extent.

The High Court did not intervene with the findings of the lower authority and dismissed the writ petition.